Wednesday, June 30, 2010
ECB lends 131.9 bn in 3 month funds, below expectations
The European Central Bank lent banks 131.9 billion euros (USD 161.4 billion) in three-month funds on Wednesday, below expectations, as banks face the repayment of close to half a trillion euros in 12-month funds.
The ECB said 171 banks borrowed funds at a flat rate of 1% in the operation, which was below expectations in a Reuters poll for demand of 210 billion euros.
The amount is still the highest ever borrowed in a three-month operation but pales beside the 442 billion euros which 1,121 banks must repay to the ECB on Thursday.
The ECB's first-ever one-year loans part of the emergency support it put in place at the height of the financial crisis are not set to be renewed.
The relatively low demand should help ease concerns about bank finances which have rocked stock markets this week.
Analysts had said high demand would send a warning signal, given the ECB is charging a relatively high interest rate compared to market rates.
But it means there is a risk liquidity supplies will drop sharply on Thursday, potentially putting upward pressure on interest rates, although banks also have the chance to borrow unlimited six-day funds at a special operation.
Banks in countries including Greece, Spain and Portugal are increasingly dependent on the ECB for funding as they struggle to borrow from others due to concerns over debt and public finances.
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